Real Estate 101

Real estate definitions and concepts are explained here.

AmortizationThe repayment of debt with a fixed payment amount over the entire term of the loan. The first payment includes a smaller amount of principal and a greater amount of interest. Each payment thereafter includes an increased amount of principal and a lesser amount of interest. This causes the principal balance to decline over the repayment period. The decline of principal increases over time. The Utah Realty website includes two mortgage calculators using amortization concepts. The first shows the payment required to pay off a debit at a given interest rate. The second calculates the maximum loan at a specified payment and interest rate.
Amortization ScheduleA schedule of payments needed to pay off a loan based on amortization principles. It show each payment, the principal amount included and the interest included. The schedule will also give a total of the principal column and the interest columns.
AppraisalAn appraisal is an estimate of value of a property. It is based on information explaining the reasons for the estimate of value. The appraisal of a residence is typically based on comparing the sales price of the most similar residences closet to the one being appraised. The sales prices of the comparable properties are analyzed to determine the estimated value of the property being appraised. Appraisers are required to be licensed in Utah.
Bill of SaleA bill of sale is used to transfer title to personal property. Personal property is typically not attached to the real estate in residential sales.
BrokerA person licensed in the State of Utah to engage in real estate activities such as sales, leasing and managing real properties.
Closing CostsThe costs for selling real estate associated with settlement that usually include an escrow fee for each party, loan fees and appraisal costs for the buyer and recording fees for one or more of the parties. Taxes and assessments are apportioned over the time that each party will be in ownership during the year of sale. Home owner fees may be payable by either party depending on agreement.
Closing & SettlementClosing is what people typically call the process of selling a property. However, it is the final step in completing the transfer of title in a real estate transaction. Closing is when a signed deed is recorded, when funds are distributed to the seller and used to pay off encumbrances on the seller's property. Instructions are approved to authorize the escrow agent or the title company to finalize the transaction. Settlement is an earlier step when a seller signs a deed and when a buyer deposits additional cash and may sign a note and trust deed to a lender. The parties sign an accounting showing the amount of funds needed from a buyer and where the funds are to be disbursed.
CMA (Comparative Market Analysis)A comparative market analysis (CMA) is an evaluation of the sales price of similar, recently sold homes (called comparables) that are near a home to be evaluated. The analysis allows selecting locations, features, size and other elements for comparison. The comparison is done by computer to provide a range of value to help guide approximate market value for real estate agents. A CMA is not the same as an appraisal, which would need to be performed by a licensed appraiser.
ContingencyAn offer or agreement may be subject to a contingency that means it is a condition of the sale for either party or there may be separate conditions for each parties.
Deed (General Warranty Deed)Deeds are used to convey title to real estate from one person to another. A general warranty deed is used to warrant or guaranty the title to the property against all defects in title.
Deed (Special Warranty Deed)Deeds are used to convey title to real estate from one person to another. Special Warranty Deeds warrant or guaranty only that the seller has not created a defect in title.
Earnest MoneyA deposit of money representing a portion of the purchase price. It is offered as part of an offer to purchase a property showing sincerity and good faith. Earnest money may become forfeitable under some circumstances depending on the terms of the offer. It is typically deposited with a brokerage or with a title company and held until the completion of the sale as part of the purchase price.
EncumbranceA claim, liability, restriction or limitation of free and complete use of real property is an encumbrance. Encumbrances can include deed restrictions, encroachments, easements and covenants limiting use. Encumbrances may reduce the value of real estate or interfere with the process of selling. Alternatively some restrictions on the lots in a subdivision may enhance the value of the lots by protecting against a use on a that is objectionable to the other owners.
EquityEquity is value of ownership in a property net of all indebtedness or other liens. A $200,000 house with a loan of $120,000, without any other indebtedness against the home, has an equity of $80,000.
EscrowEscrow refers to a third party (other than seller or buyer) that will receive and hold documents and moneys until all the conditions for a sale are completed. When completed, that third party will record documents and distribute money in accordance with written instructions agreed upon by seller and buyer. Title companies often perform escrow services.
GranteeThe name for a buyer or other person who receives title to real estate. A grantor transfers or grants title to a grantee.
GrantorThe person who sells or gifts real estate to another. Title is granted to a grantee.
HOA (Home Owners Association)An association of the owners of the homes in a subdivision, the owners of condominiums or town homes in a development. The owners are given rights including voting and use of common areas and recreation facilities. The association will typically charge fees to owners in the included dwellings. HOA's are typically given the right to pursue legal action to recover delinquent fees. Owners have the right to participate in the management of an HOA.
Home InspectionAn inspection performed by an independent party to inspect a property to identify defects in the construction of a dwelling and the operation of its appliances and systems. A written report is provided.
LienA lien is a legal right of a third party to secure an obligation against the property of an owner. A mortgage or trust deed creates a lien on the title to an owner's property by agreement. Annual taxes become a lien on property in Utah until paid. A court judgement against an owner may become a lien on the owner's property through a legal procedure. Failure to pay income taxes may become a lien on real estate. Unpaid workman and suppliers of materials may place a lien on real estate in Utah.
ListingAn authorization and agreement to engage a Broker or a salesperson to offer a property for sale. Utah law requires a licensed real estate professional to have a written listing. Listings may be full service which allows a home or other property to be offered through a multiple listing service to all member-brokers. They may be single party where the property can be offered only to one individual. Some brokerages also offer flat-rate or flat-fee listings that can save close to 50% of a typical brokerage fee.
Mortgage Insurance (PMI & MIP)PMI means private mortgage insurance that may be required in connection wth a conventional loan (not an FHA loan or a VA loan). MIP means mortgage insurance that may be required in connection with a government loan. The insurance is purchased to insure a lender against a borrower's default in payment. It is usually required on a conventional loan when a buyer's down payment or equity is less than 20%. MIP is required until one has an equity of 22%. It is commonly paid monthly but could be an upfront payment. It may be possible to cancel the payment once a borrower has paid enough principal to reach the required equity.
Multiple Listing Service (MLS)Multiple Listing Services are associations of brokers in a localized area or consist of private commercial services offered to real estate brokers in a localized area for the purpose of sharing access to homes for sale and other property. When a home is listed for sale on the MLS the information becomes accessible to all member brokers and their agents. A buyer working with a member broker or agent has access to all the homes for sale in that area. The information is shared with members over the internet. It may also be shared with the public in a limited manner that allows the public to see the homes for sale with full detail through the formal MLS service.
Note or Promissory NoteA note is an obligation (promise) to repay a loan to a lender. A note is typically secured by a home or other property purchased. The home becomes the security by a document called a Trust Deed which is used to make the home the security for the loan stated in the note.
PlatA plat is a drawing showing a number of lots that comprise a subdivision. The drawing is prepared by an engineer showing the size of each lot with a legal description and with a lot number. Plats are recorded with the county recorder's office. Thereafter the official designation of a lot is the lot number of a specified plat.
RadonRadon is a radioactive gas occurring naturally in the decay of elements in soils. It can be harmful when present in sufficient concentrations. It may occur in harmful concentrations randomly in various locations. A test can be performed to determine wether it may be present in harmful concentrations. It can be mitigated in homes and other structures with proper ventilation mechanisms.
Real Estate Purchase Contract or REPCThe purchase agreement used between Buyer and Seller in Utah. It includes all the terms and conditions for the sale of real estate. It also acts as a receipt for the deposit or the promise to pay earnest money. Licensed Brokers and Sales Associates are required to use a State of Utah approved form. It may also include supplemental addenda in the form of separate documents that are referenced in the REPC. There are separate agreements for Residential sales, for Land sales and for Commercial sales.
Sales Associate or SalespersonA person licensed in the State of Utah to engage in real estate activities in association with a Real Estate Broker. These activities also include sales, leasing and managing real property in Utah.
Settlement & ClosingClosing is what people typically call the process of selling a property. However, it is the final step in completing the transfer of title in a real estate transaction. Closing is when a signed deed is recorded, when funds are distributed to the seller and used to pay off encumbrances on the seller's property. Instructions are approved to authorize the escrow agent or the title company to finalize the transaction. Settlement is an earlier step when a seller signs a deed and when a buyer deposits additional cash and may sign a note and trust deed to a lender. The parties sign an accounting showing the amount of funds needed from a buyer and where the funds are to be disbursed.
Settlement Statement An accounting of the funds a buyer needs to pay for a property. It includes loan fees, document prepare costs, an escrow fee and a proportionate amount of taxes and similar sums based on the time of ownership during the current year. It also includes a seller's costs of selling including debt payoff, selling costs, document preparation costs, an escrow fee and a proportionate amount of taxes and similar sums based on the time of ownership during the current year. Another name for this is a HUD-1 statement.
TitleTitle signifies ownership rights to a property. A person obtains title to property when it is conveyed by deed from seller to buyer. Fee title signifies complete ownership of all rights to a property. An owner may own less than fee title to a property.
Title InsuranceA policy of insurance issued by a title company to offer protection for an owner or lender from specified errors in title searches by that title company. A title policy will state who is the owner, the nature of ownership, standard exceptions and exceptions that are specific to the owner's rights based on recorded documents affecting title. Title companies must be licensed in Utah.
Title ReportThe written summary of the information obtained from a title search by a title company. The report will identify the owner and the nature of the ownership. It will disclose documents affecting title called "exceptions". Some exceptions are expected and usual while some need to be resolved. A title report is also called a title commitment.
Title SearchAn examination of documents recorded in the county recorder's office showing a chain of title from one owner to the next. The search will also typically disclose documents that affect the nature of the title to the property. For example, a title search will disclose easements granting rights to utility companies in a subdivision.